Germany to back CAF’s financing in geothermal projects and urban transportation for Latin America with €350 million

May 10, 2016

The German Ministry for Economic Cooperation and
Development (BMZ, German abbreviation)and CAF signed an agreement
by which they shall promote the development of projects that will
benefit, in the case of energy, countries such as Colombia,
Ecuador, Peru, Bolivia, Chile and Mexico; meanwhile, benefits in
the transportation sector shall be enjoyed by Latin America in
general

By means of the agreement signed today in
Caracas with the German Ministry of Economic Cooperation and
Development through its Embassy in Venezuela for a total of €350
million, the German government has granted its approval for KfW
(German development bank) to negotiate with CAF - development bank
of Latin America- regarding two new concessionary credit lines
during 2017.

The strategic alliance for the promotion of
sustainable development in Latin America between CAF and KfW was
deepened with the signing of an agreement in which better
conditions will be offered for financing geothermal projects (€250
million) and for urban transportation (€100 million). The
agreement's signing was lead by the institution's president,
Enrique García, and the German ambassador to Venezuela, Stefan
Herzberg.

"One of the objectives that we're fulfilling
with alliances, such as the one we have with KfW since 1977 and
German authorities in general, is to improve financing conditions
for member countries and to help them to be more efficient in the
distribution of resources, which are limited. These contributions
allow for progressing in the development of sectors that are highly
impactful for productive transformation and competitiveness, such
as renewable energies and urban transportation," García
explained.

On his part, the German ambassador to Venezuela,
Stefan Herzberg, highlighted: "The German government celebrates the
fact that CAF has established in recent years a broad system of
environmental and social management, with financial contributions
from CAF, for identifying, managing and monitoring social and
environmental risks. This clearly demonstrates that CAF is very
receptive in terms of standards with respect to development
cooperation. For the Federal Republic of Germany, CAF is the most
important regional partner in Latin America."

The diplomat also underlined that the German
government's cooperation in the extremely important objective of
climate change has continuously increased in recent years, reaching
a confirmed level of financial support of currently more than USD
1.5 billion. In 2015, a total of €350 million was approved at a
very favorable rate for the projects "Facilitation for the
development of geothermal energy"[Facilidad para el desarrollo de
la energía geotérmica]and "System of relevant climates in the urban
transportation sector in Latin America"[Sistema climas relevantes
en el sector de transporte urbano en América Latina].

The first credit line of €250 million shall be
allocated to lowering financing that CAF grants to geothermal
projects in the region, whether for supporting excavations for
measuring the potential of energy generation, or for the very
construction of the geothermal plant. This credit line constitutes
part of a program lead by KfW and CAF, in which other agencies also
participate and which arose in 2013 in order to identify the
potential of geothermal energy in Latin America. The countries with
the greatest potential in South America are Colombia, Ecuador,
Peru, Bolivia and Chile.

The second line of credit, for €100 million,
will lower the interest rate that CAF offers to finance projects in
urban transportation in the region, such as subways, buses and
trains, among others. With this operation, continuity of support is
given to this sector, considering that in October 2013, a first
line of credit for USD 200 million was signed with KfW, with which
the Panama Metro Line 1 (USD 60 million) as well as the Lima Metro
Line 1 (USD 140 million) were refinanced.

In the past 5 years, CAF and the German
government (BMZ) through its Embassy in Caracas have signed
agreements such as this one for a total amount of €785 million in
credit lines to support the regional projects that CAF is financing
in sectors such as climate change, water and sanitation, energy
efficiency, renewable energies and transportation, among
others.